Markowitz in the brain?

Abstract

Brain-scanning (fMRI) evidence is presented that activity in certain sub-cortical structures of the human brain correlate with changes in expected reward, and with risk. Risk is measured by variance of payoff, as in Markowitz’ theory. These brain structures form part of the dopaminergic system (which consists of the neurons that emit a crucial chemical, namely, dopamine, and the areas to which the dopamine neurons project). The dopaminergic system has been known to regulate reward expectation. We show that it is involved in risk perception as well. As such, our findings support for the human brain what recently had been discovered in the primate brain (using single-neuron analysis instead of..